2009 (7) TMI 1150

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..... is eligible to claim deduction u/s 80P(2)(a)(i) of the Act? Held that:- In the present case, the investments have been made by the Bank in government securities, fixed deposits, etc. and the income is utilized for business. There is nothing on record to show that this case of the assessee is not acceptable in view of the law clearly stated by the Bench of this Court in C. I. T. v. Ratnagiri District Central Co-operative Bank Ltd.[2001 (9) TMI 60 - BOMBAY High Court] for which we have no reasons to disagree. We dismiss the appeal while answering the questions in favour of the assessee.
Swatanter Kumar and N.A. Britto, JJ. For the Appellant : S.R. Rivonkar, Adv. For the Respondent : R.G. Ramani, Adv. JUDGEMENT:- Swatanter Kumar, J. .....

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..... g out of SLR would be entitled to deduction under Section 80P(2)(a)(i) in terms of the Judgment of the Supreme Court in M. P. Co-operative Bank Ltd. v. Additional CIT(218 ITR 438) only if it was income from the banking business. These amount had been invested in approved securities by the Assessee Bank i.e. the Central Bank and other trust securities. Noticing that the object of Section 80(P)(2)(a)(i) was to encourage co-operative movement in the country and any income of the society from the investment which does not form part of the circulating capital or working capital or stock-intrade of the banking business cannot be said to be the profits and gains attributable to the business of banking and entitled to deduction under Section 80P(2) .....

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..... in view of what is held in the case of C.I.T. v. Ratnagiri District Central Cooperative Bank Ltd.(supra) as the issues are no way different. In fact in that case while referring to the Judgment of the Supreme Court in the case of Bihar State Co-operative Bank Ltd. v. CIT (1960) 39 ITR 114) where the Apex Court clearly held that short-term deposits by the Bank was income from normal banking business and was, therefore, exempt from the liability to pay income-tax. It was further specifically held in that case that since the society in that case was engaged in banking activity, its normal business was to deal in money and credit and, therefore, the money laid out in the form of short-term deposit did not cease to be a circulating capital and .....

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